1. Forecast at the right level.
Sales Forecasting accuracy can be greatly improved by deciding on the right level to sales forecast at. Is a forecast at SKU level appropriate? In many environments it is not and greater detail must be made available by segmenting history and forecast by channel, sales region, or even customer. In other cases companies are currently forecasting at customer level when a more accurate forecast could be achieved with less effort by working at a higher level. Send us your sales history for real demo
2. Review forecasts at aggregate levels
When reviewing item level forecasts it is all to easy to "pad" each item's forecast just in case. It is not until the item level forecast is aggregated and reviewed at a brand or product category level that the cumulative effect of this "padding" is exposed in the form of a clearly unachievable growth in forecast over history. Aggregate level forecast review is an essential part of the forecast review process because it allows for a "sanity check" of the forecast compared to history and preferable company budgets. Any anomalies must be identified and corrected before putting the forecast into the inventory planning system.
3. Review forecast by exception
20% of your products are the important ones so why not use ABC analysis to focus on the products which are most important first while the mind is still fresh? Why not use deviation filters to identify the few products in the database which have unusually high or low trending forecasts when compared to history? Survey
4. Measure and report forecast accuracy
MXI Forecast Pro UK (Free Trial available) allows you to review and report on forecast accuracy as required. 100 Standard reports offer analysis to help you identify weak areas and opportunities for forecast accuracy improvement.
Success breeds success
A forecasting process will rarely be successful if the progress is not measured and the results reported to all participants. Take advantage of the functions available and start your forecast accuracy graph this month. Let everyone know how "good" or "bad" they are doing and what progress they have made over time. Success breeds success. Contact us now
SAVE YOUR FORECAST EVERY MONTH
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As budgeting and forecast experts we are often asked what financial modelling software to select to improve an organisations forecasting accuracy to improve business planning and business planning strategies. Further most organisations want to reduce the cost of the budgeting cycle, takes less time doing it particularly gathering the data to do so and make more use of the plan when created.
So we need ask some questions.
Goals: What do we need to achieve to become successful?
Measures: What parameters will we use to know if we are successful?
Targets: What quantitative value will we use to determine success of the measure?
Initiatives: What will we do to meet our goals?
Seasonality and Trending is usually a big issue for forecasting and planning as it plays a very big role Supply Chain planning, margin analysis, logistics and profit projections. The large ERP systems just have enough insight or flexibility to deliver the forecasting accuracy required. We constantly come across companies who are working with 40 - 60% forecasting accuracy where they need 70% plus accuracy at least.
For example we use Forecast PRO sales forecasting software exponential smoothing to detect seasonal changes in data by ignoring the irrelevant fluctuations irrelevant. Forecast PRO exponential smoothing (unlike moving averages smoothing) older data is given progressively-less relative weight (importance) whereas newer data is given progressively-greater weight.
Also called averaging, it is employed in making short-term forecasts. Our Excel challenge works with organisation everyday to demonstrate how we can speed up forecasting, sales and operations planning, demand management. Check out the excel challenge for yourself to see how you can start moving in the right direction.
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MXI explain how MXI Quantrix Modeller will help with budgeting and modelling your organisations integrated financials or a company you wish to acquire. You will need projected revenues, expenses, costs,debts and taxes driving expected profit. Next you need to make assumption examining the key business drivers on the Balance Sheet, Growth rates, Prices, Creditor - debtor days. And most importantly you need a robust model so that you can produce best and worst case scenarios.
ASSETS
Creditors
Grow with credit sales (net revenues)
Using an IF statement, model should enable users to override with creditor days sales outstanding (DSO) projection, where days sales outstanding (DSO) = (AR / Credit Sales) x days in period.
Stock
Grow with cost of goods sold (COGS) -
Override with inventory turnover (Inventory turnover = COGS / Average stock turn)
Expenses
Grow operating expenses (may include COGS if the prepaids are cycled through COGS)
Other Current Assets
Grow with revenues (presumably these are tied to operations and grow as the business grows)
If reason to believe that they are not tied to operations, straight-line projections.
Capital Assets, Plant Etc
PP&E - beginning of period (Opening)
Capital expenditures (grow historicals with sales or use mgmt or analyst guidance)
-Depreciation (function of depreciable plant & equipment opening balance by life expectancy)
- Assets sales (use historical sales as guide)
PP&E - end of period (Closing).
Intangibles
Intangibles - Opening
Purchases (when disclosed, grow historicals with sales or use mgmt or analyst guidance)
Amortisation (when disclosed, amortizable intangibles BOP divided by useful life)
Intangibles - Closing
Simple alternative is to just straight-line or grow entire balance with sales
Goodwill & Other Assets
Straight-line
LIABILITIES
Accounts payable
Grow with COGS
Override with payables payment period assumption
Accrued Expenses
Grow with operating expenses
Taxes Payable
Grow with the growth rate in tax expense on income statement
Other current liabilities
Grow with revenues
If reason to believe that they are not tied to operations, straight-line projections.
Using MXI Quantrix with a little effort in modelling the plan this can achieved in 1-2 days and create a model the entire business can use. Built with budgeting and forecasting software that will generate a real finanical model which the company can link to the ledger for rolling forecasts into the future.
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MXI Software provider of Budgeting and forecasting software in the UK Ireland providing companies with the data analysis tools and busines intelligence which enables organisation to strategically plan find and work the true profit drivers in their business using proper financial modelling software. MXI suggest Quantrix business intelligence tools. WATCH HERE
We want to be the partner of choice in UK Ireland for organisations wishing to implement leading edge demand management, sales forecasting, business modelling and financial modelling. Take the Excel challenge.
We believe that spreadsheets are inaccurate, error prone and too difficult to correct when faulty. Its now well documented that most large consulting practices, Bearing Point, PWC, Deloitte etc state clearly that any spreadsheet with more than 100 rows of data is likely to contain errors. Just Google it for yourself.
An example of the crucial role played by spreadsheets is the valuation of most Pension and investment portfolios around the world. The US albeit in a slightly different form, Iceland, Ireland and Italy all have state agencies who are responsible for relieving Banks of most of their toxic property portfolios. indeed many of these agencies will become the largest property companies in the world.
These agencies are using spreadsheets to value these portfolio's or funds. This can't be right in this day and age. In Iceland and Ireland this will amount to the largest investment ever made by the state and the use of a proper financial modelling intelligence to get at the facts.
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Using Quantrix Treasury management budgeting and forecasting software, MXI Quantrix UK/Ireland helps organisations to manage treasury and working capital management to free up resources for investment and growth. Spreadsheets errors and inaccuracy prevents these same players from taking advantage of the opportunities to improve and strengthen cash flow, settle payments quickly, reduce working capital liabilities, negotiate favourable payment terms with suppliers, increasing the value of debt management staff.
So you need to ask yourself is using a spreadsheet the best way to do all of this. Considering that you need to splice the data in so many different ways. Decisions are usually required quickly, 3 months, 6 months, roll your deposit or move it elsewhere. CEO and Finance directors need clarity when managing loans and deposits. They need to be able to ask questions and get answer quickly. MXI Quantrix UK, with our treasury management and cash planning software, enables this.
Quantrix helps define investment and treasury management objectives by balancing risk thresholds and liquidity needs more effectively against optimal costs for investing to achieve the best possible yields.
An effective investment and treasury management policy outlines investment philosophy, roles, and responsibilities. It defines acceptable types of investments, reports and forecasts against stated objectives and guidelines for investing, such as the acceptable categories of investments, reasonable levels of investment volatility, strategies for investment to fuel growth and procedures for changes and exceptions to the policy.
Quantrix helps companies manage cash globally, see the gains, opportunities, risks with our Treasury management and cash planning software.
Do you want to see what the difference between Quantrix and Exel is? Why not take our Quantrix versus Exel Challenge to find out!
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Is this familiar? You work in a large organisation with lots and lots of data. But every time IT or Finance are requested to provide some information it takes up to two weeks to get it back by which time you are onto the next challenge. There is no serious analysis and forecasting, business planning is suffering, profit opportunities are left begging to be taken yet no action, why? All because nobody could answer the question "what if we did this", "changed this", "allocated more funds to this" or "increased headcount in this department" etc. There is no shortage of data in the business, no shortage of IT power or resources. You need to clearly see the business cost/profit drivers, prepare scenarios and model them so you can test them and develop working budgets and forecasts.
We work with client's everyday providing them with this first class business intelligence which helps them and their business to identify business profit or cost drivers. Building financial models or business model that allow these organisations to plan better for a fraction of the cost and time it takes other companies or Government Departments using spreadsheets. We help customers to identify the right financial and budgeting software, business modelling software, business intelligence software to do this. Auditors, Regulators, Tax Authorities are not too keen on spreadsheets the known error levels and business risk.
Why not take the MXI Excel challenge? We will work with you to develop a trial model to demonstrate the value to your organisation in this approach, better business analysis, modelling and forecasting for your business with much greater accuracy, best and worst case scenario testing. After all does not business need every help it can in today's environment. And the best way to stay one step ahead is to stay informed, making the right decisions. Read more here: Excel Challenge
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We learn from International reporting that Government Central Banks around the world were deliberately and willing understating risks to their political masters. In some cases they simply feared for being the bearing of bad news and party poppers. Some even pompously thought their masters might not understand the complicated financial implications of the asset bubble.
In the case of Ireland the extent of this overvaluation was a high as 15% in Q4, 2005. Asset prices were notably higher than the actual asset values. We now know for sure that most Central Banks and banks did not have the adequate financial and budgeting software reporting tools to demonstrate and accurately forecast these risks. Most of this complicated work was done on wonky excel spreadsheets. Everyone knows that a picture paints a thousand words; therefore some flexible forecasting graphs with forecasting scenario modelling would have easily demonstrated the problem to outsiders and government officials.
This dangerous anomaly was not communicated adequately. Quantrix Forecasting and Modelling Software for MXI high end reporting capabilities could clearly demonstrate these risks much more clearly with scenario modelling features and slider bar options. (See Slider Bars in Action)
So how could have proper Forecasting and Modelling software have helped the Treasury and Ministers of Finance. Chancellors and Ministers have only minutes in their busy schedules so they need a solution that can quickly identify forecasting risks and challenges. Quantrix Modeller would have made the point so clearly and effectively they would be compelled to act earlier. It goes without saying that proper financial risk analysis and scenario modelling might have intervened earlier with Northern Rock, Lehman Brothers, Anglo Irish Bank.
This situation does not only apply to the banking and property markets. It should also apply to your business as remember a forecast is defining what tomorrow's business will be. A great start should be to take the Excel challenge. Find more details on the excel challenge.
So how to do your Forecasting and Scenario Modelling Government Style? Just don't and hope for the best.
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Demand Planners, Sales and Operations planners, Sales Forecasters are always interested in how the Forecast Pro uses data sourced from all over the organisation. Demand Managers are constantly trying to improve the accuracy of forecasts using budgeting and forecasting software. They want to reduce the use of spreadsheets and in particular focus on the most inaccurate forecasts. Many item forecasts with low volumes and patchy turnover can be as low as 20% accurate.
If you are running a large Retail, Distribution or Manufacturing company you might have data produced from your Trend purchasing screen supplied as part of their ERP Software suite. This data is also produced by a Manufacturing MRP output report after Materials requirement planning is completed. You can automoate link file so this data is pushed into Forecast Pro where the Forecast Pro expert selector operates.
Forecast Pro examines the data (each line or item) and then selects the most appropriate statistical forecasting methodology for each individual item on the list using such forecasting methods such as Holt Winters, Exponential smoothing. It's important to appreciate this point as spreadsheets simply use the same very low tech forecast approach for everything.
What should happen next is that the Forecast Pro user will having satisfied themselves that the forecast is satisfactory will push the data towards the Purchasing & Logistics department.
We have customers who improved accuracy on fast moving parts with good sales histories by as much a 8 % almost immediately and as much as 30% in the short term on hard to forecast slow moving parts.
And remember whatever you do don't just leave Forecast Pro run in the corner unattended, friendless and all alone. It's an everyday product which can continuously improve forecasting accuracy into the future. Become a friend of Forecast Pro by trying Forecast Pro for yourself at no charge. Click here for more details: Forecast Pro
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Forecast Pro Trac is the latest version of the Forecast Pro family and it's ideal for demand forecasting, demand planning, demand management, sales forecasting, item level planning, sku forecasting. Easy to use, light years more advanced than spreadsheets and enjoys award winning status for its statistical forecasting accuracy and is much less expensive than many of the alternatives.
MXI Forecast PRO UK combines forecasting, management reporting, graphing, reporting and adjustment capabilities as found in Forecast PRO unlimited. However Forecast PRO TRAC also provides easy to understand data graphics business intelligence that concentrate attention on the MAPE to drive forecasting accuracy improvement.
Forecast PRO uses will be able to select non performing forecasts and specifically concentrate attention on forecast accuracy. For example a specific exception report in the business intelligence selector allows users to select forecasts which are greater than 50% out against actuals and concentrate on them.
Forecast Pro TRAC allows you to view your data and forecasts in as many units of measure as you need. A drop down menu lets you select for example.
Rearrange your hierarchies.
With Forecast Pro TRAC's powerful "shuffling" capability, you can rearrange hierarchies with just a couple of clicks. Generate reports showing product-level forecasts broken out by customer and the
Forecast Accuracy, Identify SKU, pruduct groups which need attention
With Forecast Pro TRAC's flexible exception reporting, you can automatically flag exceptions, saving you from having to manually review a long list of items
Statistical forecasting accuracy improvement
Forecast Pro TRAC maintains an archive of your previous forecasts (both statistically-generated and adjusted forecasts) so that you can compare and contrast previous forecasts to what actually happened.
Consolidate your team's forecasts.
Forecast Pro TRAC breaks large forecasting projects into smaller pieces that can be worked on separately and then reassembled into consolidated forecasts. For example, if three demand planners are responsible for forecasting three different geographical territories, they can work on their forecasts separately; after they're done, their consolidated forecast can be further manipulated.
If you are still using Excel, download our free whitepaper on the true cost of Excel: True Cost of Excel
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We are regularly asked how much historical data I need to improve my forecasting accuracy using sales forecasting software?
Here is a general guide, to reliably fit and test statistical models, you need a time series of 48-60 months. To pick up seasonal patterns correctly you will need at least 3 seasonal cycles to improve forecasting accuracy for a forecasting sales or purchasing, stock seasonality model.
With 48 months, for example, the first 36 can be used to fit the model and the last 12 to test the model's forecasting accuracy. For short-term forecasting, going back more than 60 months is unlikely to be helpful, since most statistical methods apply more weight to the more recent than to the distant past.
And when there is no data available and a forecast is none the less required, it is still possible to develop a forecast. One easy way is to enforce the history from another item and literally cut and paste it into the forecast making manual adjustments. Top-Down Planning is another option when using Forecast Pro. This uses the pattern from the product group to drive the forecast. This has the benefit of being automated and derives its sales and seasonality from the other like products at the group level. The results can then be reviewed and adjusted at the granular level using modifiers by the planners.
A little user experience in Forecast PRO, natural curiosity and training will greatly improve forecasting accuracy, speed and response times.
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QUANTRIX financial modeller 3.7 from UK Vendors MXI has a great new data add on business intelligence component which significantly augments the renowned financial and business modelling software Quantrix. Users are always looking for better ways to access and use the huge amounts of data that reside on their computers and within their business intelligence software. Naturally using this data correctly can really help drive a business.
We (MXI) thought we would provide usage examples to give some overview of potential use of Quantrix. Remember the key here is to avoid the huge cost normally associated with Business Intelligence implementations. In the California Energy market Quantrix DataNAV provides real-time transactional data online allowing market makers to query and instantly access market information. This is provided as a SAAS (software as a service) offering.
PMC President Henry Shin, reports his client navigate extensive information using Quantrix DataNAV without having to download huge amounts of data and without having to wait 2 weeks for the IT department to build custom reports. Users simply use DataNAV to provide the ease of use, integrity and obviously management level reporting online.
In the UK we are working with Manufacturing customers to build improved costing and pricing methodologies using Quantrix DataNAV. Pulling information from a range of IT platforms containing more than 30 years of data. Clients will price, source, design and build new products in less than half the time, meeting all of the regulatory requirements.
Quantrix Modellers multidimensional data and business modelling and analytics software enables financial professionals to move on from spreadsheet technology and consequently develop finance and business models of the highest integrity, visibility and flexibility. This is really important due to the heavy reliance on spreadsheets within large organisations in order to leverage their CRM, ERP or BI products.
Register now to watch our free Quantrix Demo.
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Planning is an expensive, time consuming exercise rarely near the top of anyone favourite task. An annual exercise for any corporate entity. Budgeting, Planning, Forecasting and financial modelling is currently a mixture of Business Intelligence, ERP systems and spreadsheet with the later doing most of the heavy lifting.
A third way emerges in all of this which provides a proper platform for IT and Business users to co- exist successfully. Business Planners need speed and flexibility which is why spreadsheet are so common where the IT dept Manager would prefer a more structured disciplined approach. Watch our demo video on forecasting to see why.
The third way of which we speak allows complete integration to existing data sources.. CRM, Bloomberg Screens, ERP Software, Data Warehouses. The third way is a robust, integrated scalable solution which is also multi dimensional at the coal face where the Business Analyst does the financial modelling and planning. More flexible than a spreadsheet, structured in its approach to satisfy Auditors, Regulators and IT Depts.
Business Users, Forecast Analysts and Planner do have alternatives which despite upfront costs less expensive that spreadsheets. There are planning and modelling solutions like Quantrix. They create, adapt and coordinate business plan with ease.
Define, adapt and apply the business logic & structures to produce Forecasts, plans, models budgets. Scenario test these plans vigorously allowing Managers a full 360 view of their options. Business Analyst can now have platform for testing business drivers, business logic and scenario testing that drive the analytics process and management reporting with much great accuracy and quicker than existing approach.
IT becomes the enabler now, free of the concerns about spreadsheets, supporting the business teams certain in the knowledge the process is part of the organisation not building Islands of remote spreadsheets.
IT Dept has a workflow process which it can demonstrate and support into future so there are no succession issues. There are standardised costs, 3rd party support, visibility which suits the way most IT depts. run. No more spreadsheet errors to chase down, thorny version control issues associated with spreadsheets. Regulated access the company's business systems for integration providing the vital source information on which budget and forecasts are built. And finally a audit control illustrated of who changed what when.
IT, Finance, Sales, Operations Planning, Management and Principles get a disciplined, flexible, productive solution that does not hem people in like a large enterprise budgeting solution which brings budgeting to the new level.
A great way to see such forecasting technology is action is by trying it for yourself. Try the Quantrix Challenge
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